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Role of Asset Reconstruction Company in India

Posted by gaurisatpute on February 17th, 2020

An asset reconstruction company, also known as ARC, is one of those financial institutions that look after the losses of other financial institutions, especially the banks. Many borrowers come to the bank to ask for financial aid or a sum and against it, they pledge on securities or collaterals like their house or a car and so on. The securities act as deposits so that if the borrower fails to repay the bank in the due time then the securities will be ceased by the banks and liquidated to realize the banks' dues. However, banks are the largest institution dealing with the finances of the majority of the population.

There are so many borrowers and so many defaulters that sometimes the banks overlook the case of defaulters without taking any legal action. Now, the sections that remain unfulfilled are compensated by an asset reconstruction company. They buy the debts at a reasonable rate which is agreed between both the institutions and accordingly it tries to compensate the losses. Asset Reconstruction Company India is not an autonomous company but an institution that is registered under the RBI.

Here are the ways the Asset Reconstruction Company in India works:

  • They buy the debts of the banks, which are the non-functioning assets so that they can take charge under their control.
  • They try to fill in the losses by selling or renting the asset.
  • They contact the borrowers and reorganize the payments of the debts. They implement new ways of payment so that the losses could be curbed.
  • When contractual meeting with the borrowers do not help, they take legal actions and seize the securities deposited by the borrower.
  • To meet the conditions of a healthy growing economy, Asset Reconstruction Company India converts these assets into shares so that investors are attracted and losses can be covered by the investments made by different investors in the market.

Thus, we see that the Asset Reconstruction Company in India is like a guardian to the banks. When banks suffer losses, these companies come to the rescue by providing for them and then taking the entire burden of losses on themselves by buying the non-performing assets of the banks. They bring about the balance in the economy by implementing various alternatives in the market and thus, it plays a major role in catering to the economy of the country.

Also See: Reconstruction Company, Asset Reconstruction, Financial Institutions, Those Financial, Company, Banks, Asset

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